Videogame stores: RIP?

2009-06-11 09:39
A scene from the popular video game Halo 3. (Microsoft, AP File)

A scene from the popular video game Halo 3. (Microsoft, AP File)

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Los Angeles - Will digital downloads kill the videogames store? That's the multibillion dollar question facing retailers from Wal-Mart Stores Inc and Target Corp to GameStop Corp, as internet distributors continue to grow.

Retailers like Target splashed out on large booths at last week's E3 Expo in Los Angeles, showcasing games like Activision's Transformers: Revenge of the Fallen.

But gamers - especially on personal computers - are increasingly turning to alternative methods to play and buy games, such as downloading or "streaming" online games, rather than trekking to a store.

Take industry veteran Dave Perry, whose Gaikai online system lets PC gamers buy and stream games through their web browsers without needing to download any content.

"Our solution is not to dive into a fight with Sony (Corp), Microsoft (Corp), Nintendo Co Ltd, as it wouldn't gain any 'new audience' for publishers," Perry said.

"Instead, our strategy is 100% focused on being an ally to publishers and first-party hardware makers, by delivering them audiences they don't reach today."

Fast-growing business

Digital downloads are still a small, but fast-growing business. According to the NPD group, 17% of games sold in 2008 by PC gamers were digitally downloaded. Microsoft and Sony are trying to convert console gamers who have become accustomed to consuming music and movies digitally via services like Netflix and Apple Inc's iTunes.

Wedbush Morgan Securities analyst Michael Pachter estimates digitally downloaded games will account for roughly 2% of industry sales this year, or around $400m. He expects demand to double annually for a few years, to $800m in 2010 and $1.6bn by 2011.

"As broadband penetration increases and the internet connection migrates to the living room, downloads or cloud computing solutions will become much more viable," he said.

"Downloads will become 20% of the market within five years, and probably peak at around 50% of the overall market in 10 years," said Pachter. This assumes an overall market growth of 5 to 10% annually, he added.

With videogame sales growth slowing somewhat, publishers and developers are seeking new channels to reach customers.

Yet some retailers resist the format, arguing that going through a third-party online distributor further saps margins for both developers and retail chains. Analysts say the big retail chains like Wal-Mart and Target have also yet to embrace and invest in digital sales.

"Nothing that has been digitally distributed retains the same value as a retail version; it's always less," GameStop CEO Dan DeMatteo said in September.

Digital distribution box

Getting content on demand is no stranger to households accustomed to watching movies over set-top boxes, or teens streaming music over the internet. But spontaneously ordering a game is stymied somewhat by the limits of the gamers' personal computer system. Some fledgling companies try to work around that.

Over the past seven years, entrepreneur Steve Perlman has been developing a digital distribution box called OnLive. He hopes to offer high-definition PC games on low-end hardware.

OnLive has struck deals with Electronic Arts Inc, Ubisoft, Take Two Interactive, Warner Bros Interactive Entertainment, THQ, Epic Games, Eidos, Atari and Codemasters. While the company had 16 games on display in March at the Game Developers Conference, it had no presence on the E3 show floor.

OnLive this fall is slated to launch a subscription service similar to Microsoft's Xbox Live.

NPD estimates 18% of Xbox 360 users who have a "Gold" membership to Microsoft's Xbox Live service regularly download from Xbox Live Arcade, and 10 percent of PlayStation 3 users regularly buy digitally from Sony's PlayStation Network.

The largest independent games distribution network is Valve Software's Steam, which has 21 million users and 700 games.

Doug Lombardi, vice president of marketing at Valve Software - known as the groundbreaking backers of the Half-Life shooter series - said digital distribution has already been largely embraced by the industry.

But the real forte of digital distribution may be the ability to provide automatic updates and extras, keeping things new as with the Team Fortress multiplayer-shooter series.

"Now that games can be connected to their audience, they will last and grow well beyond their traditional 6-month to 1-year sales cycle," Lombardi said.
 

Read more on:    netflix  |  sony  |  ubisoft  |  activision  |  microsoft  |  nintendo  |  los angeles  |  playstation network
NEXT ON NEWS24X

Read News24’s Comments Policy

 

Inside News24

 
 

Anglican Church urges people to vote

The Anglican Archbishop Thabo Makgoba has called on his congregation to use their right to vote, amid a campaign to spoil ballot papers.

 
 

Latest elections multimedia

Why Jack Parow wants you to vote on 7 May
The ad the SABC doesn't want to air
Elections 2014 in one cartoon
This year's election posters
 
Traffic
Lottery
 
  • Thursday Sir Lowry's Pass - 05:35 AM
    Road name: Old Sir Lowrys Pass Road
    TRAFFIC LIGHTS not working at Bezweni Road
  • Thursday Cape Town - 05:35 AM
    Road name: Buitengracht Street
    TRAFFIC LIGHTS not working at Waterkant Street
 
More traffic reports...
 

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Escape winter, head to Mauritius

Escape winter by spending 7 nights in Mauritius' tropical bliss from R13 215 per person sharing. Includes return flights, airport transfers and accommodation. Book now!

Kalahari.com - shop online today

Get many eggs in one basket!

Gaming bundles: 2 Super Hits games for R99, 3 Disney games for R99 and more + exclusive accessory bundles only available on kalahari.com. While stocks last. Shop now!

25% off bestselling books!

The Real Meal Revolution by Tim Noakes, Jeffrey Archer’s Be Careful What You Wish for, Man’s Search for Meaning by Victor E. Frank and many more titles. Shop now!

Up to 25% off electronics

Buy top electronics and save up to 25%. Such as kalahari.com’s 1# selling product the gobii eReader, Patriot X Porter flash drive, Asus Nexus 7” 3G tablet, Samsung Galaxy SIII, Lenovo G580 Notebook and many more. Shop now!

DStv HD PVR Decoder now R949

The DStv HD PVR Decoder has further revolutionised the television experience with lifelike viewing, sharper images, more vibrant colours and precision picture quality. Now R949, save R550. Offer valid while stocks last. Shop now!

Up to 30% off appliances & homeware

Save up to 30% on appliances and homeware this Easter! Offer valid while stocks last. Shop now.

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

DSTV Mobile iDrifta

The iDrifta is a plug and play mobile DVB-H receiver...

From R445.00

I'm shopping for:

Horoscopes
Aquarius
Aquarius

You may be good at organising events but they do take their toll on your energy levels. You may need some time out today just to...read more

There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.